From bootstrapping to IPO: Estonia tech startup TextMagic to go public on Nasdaq First North Tallinn

Text messaging service provider TextMagic, a UK tech startup that has never raised external capital, plans to conduct an initial public offering (IPO) of its shares this year. The shares will trade on First North Tallinn, an alternative market within Nasdaq Baltic.

TextMagic was founded in 2001 by Dan Houghton. Then in 2007, current CEO Priit Vaikmaa joined the company. TextMagic has been wholly owned by Estonians since 2013, after Dan vendor-financed a management buyout (MBO). Today, TextMagic is an international business text messaging company that helps small businesses engage their customers. It operates mainly in the U.S., the UK, Canada, and Australia. The company was previously headquartered in the UK but is now located in Estonia.

In 2020 the TextMagic Group recorded sales revenue of 7.92 million euros, a 45% increase over 2019. Moreover, 2020 EBIDTA stood at more than 3 million euros. Revenue estimates for 2021 exceed 10 million euros. TextMagic clients send over 20 million text messages each month using its business SMS marketing software. TextMagic currently employs 40 people in four countries.

With the TextMagic.com platform, companies can send text messages directly from computers. The software integrates with websites, booking systems, customer administration tools, and other software. From the TextMagic platform, customers can organize and administer all their business contacts, view SMS replies as chats, and communicate with context.

“The market for mobile messaging platforms is highly fragmented, and only SMS offers a universal and reliable solution that can reach everyone. Most of our clients are small- to medium-sized companies in the U.S. and UK. They range from car repair shops that notify their customers of bookings to hospitals that use text messages to coordinate their respective staff. Our business texting software solution enables large numbers of messages to be sent simultaneously. This gives TextMagic customers an opportunity to sell, market, and communicate via text messages,” explained the majority shareholder and chief executive of TextMagic, Priit Vaikmaa.

According to Mr. Vaikmaa, TextMagic plans an IPO of shares, with a maximum offering size of 2.5 million euros. The shares will be offered for trade on First North Tallinn, an alternative market of Nasdaq Baltic.

TextMagic will use the money raised through the IPO to develop Touchpoint, its new product. “Touchpoint is a significant enhancement of our current product. It is customer engagement software for sales, marketing, and customer support. By using it, companies can integrate various communication channels (SMS, email, text applications, and calls) into one environment. It will combine engagement and communication channels required to find customers, close deals, and provide customer support. It will also offer user-friendly reporting, analytics, and collaboration capabilities. The launch of Touchpoint is planned for 2023.”

Priit Vaikmaa also notes that, although the company has concentrated its efforts in the U.S., it has plans to introduce TextMagic software on a broader scale in Europe. “Over the years, compared to other channels such as email marketing, the importance of SMS communications for businesses has increased significantly. Text messages are better at reaching people. In 2020 TextMagic customers sent 172 million text messages and, during the first 9 months 2021, they have already sent 182 million texts.”

TextMagic also plans to distribute stock options among its employees as soon as it is listed on the First North Tallinn alternative market. “Just like other tech companies, a strong team is crucial to our success. To ensure the company’s continued growth, we want to engage and motivate our people by offering stock options, not only to the management but to all team members,” Mr. Vaikmaa explained.

TextMagic’s largest markets are in the U.S., the UK, Canada, and Australia. The company has over 25,000 business customers who use its SMS marketing platform to access more than 1,000 mobile networks. In 2019, Zapier listed TextMagic among the fastest-growing applications used for work.